Market Wrap
Narratives
At the end of the day, the key to undermining mechanical market dynamics and their potential to exacerbate a selloff will come down to the willingness of vol sellers, either monetizing hedges or exploiting VRP, to push back on the spot move lower. This has so often been the case throughout the past year-and-a-half chop move in equities, where owning vol and gamma has been nothing but a pain trade due to said willingness to monetize / sell / short ‘rich’ vol, immediately stifling further selloff opportunities — Charlie McElligott, Nomura
Week Ahead
This is a relatively slow weak for economic data. That means that the markets will be mostly entertained by the talking heads of the Federal Open Mouth Committee. The chattering started on Friday, when two Fed officials (Governor Michelle Bowman and Boston Fed President Susan Collins) endorsed Fed Chair Jerome Powell's remark during his presser on Wednesday: "We're committed to achieving and sustaining a stance of monetary policy that's sufficiently restrictive to bring down inflation to 2 percent over time.”
- The BIG event of the week will be the release of August's personal income and PCED inflation rate (Fri). We are expecting to see some slowing in consumer spending and another moderate core inflation number for the third month in a row. We know that real retail sales edged down in August.
- We also know that energy boosted August's CPI inflation rate and that the final demand PPI for consumption (which does not include rent) was up only 2.0% y/y in August. There was also a very funky big jump in portfolio management fees in July that should be reversed in August.
- This week, the last three of September's five Fed regional business surveys will be released: Dallas (Mon), Richmond (Tue), and Kansas City (Thu). They will probably confirm the New York and Philly surveys which remained depressed, but less so than during the spring and early summer months.
- September's survey of consumer confidence (Tue) should give us an insight into the labor market. The "jobs plentiful" series should continue to decline, but remain relatively high.
- We expect that both bond and stock markets will mark time awaiting September's employment report on October 6. Then again, there is the Wall Street adage to "sell Rosh Hashanah and buy Yom Kippur." - Yardeni Research
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Earnings
Metric | UpDn | This Week | Prior Week | Baseline | Baseline TF |
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Forward 4-qtr Estimate | 🔴 | 232.63 | 233.39 | 228.39 | January 1, 2023 |
Forward 4-qtr PE | 🔴 | 18.5 | 19 | 17.2 | January 1, 2023 |
Nominal Earnings Yield | 🔵 | 5.38 | 5.24 | 5.86 | January 1, 2023 |
Options
Metric | UpDn | This Week | Prior Week | Net CHG | % CHG |
---|---|---|---|---|---|
SPX Implied Volatility | 🔵 | 14.32 | 11.35 | 2.97 | 26.170000000000005% |
SPX GEX Flip | 🔴 | 4,437.5 | 4,477.5 | -40 | -0.89% |
SPX Skew Adjusted GEX | 🔴 | -14,569,522,294 | -2,984,020,932 | -11,585,501,362 | -388.25% |
Equity Put/Call Ratio (CBOE) | 🔵 | 0.85 | 0.7 | 0.15 | 21.43% |
VIX Put/Call Ratio (CBOE) | 🔵 | 0.51 | 0.43 | 0.08 | 18.6% |
SPX/W Put/Call Ratio (CBOE) | 🔵 | 1.57 | 1.44 | 0.13 | 9.03% |
Futures
Dec E-mini S&P 500 futures closed at a one month low of 4361.00 Friday, off 11.00. Combined volume was 1,738,300, with the Dec contract seeing 1,736,576 traded. Across all maturities, open interest fell 8,738, or 0.41%, with Dec losing 9,130 (0.43%) to 2,122,359.
Option volumes were greatest for the Sep EW 4400 call (9,398) and the Sep E4B 3550 put (47,222). In Dec options, the most actively traded call was the 4650 strike with 4,467 changing hands, and the 4300 put leads with volume of 3,755. Calls with the most open interest are the Oct EW3 100 strike (27,095), and for the puts are the Sep E4B 3550 strike (47,282).
E-mini S&P 500 implied volatility closed the session slightly lower as the 30-day at-the-money fell by 0.21% to end at 14.57%. Gaining 0.0094% to a one month high, historical volatility (as measured by the 30-day) ended the day at 12.20%.
Bull v Bear
This Week (30d ATM IV 14.57% v 30d RVOL 12.20%)Bulls will seek to recapture > DTF 1TFU 4399 and 4400 (+0.89%) on closing basis. Upside: DTF BOS 4434.25 (+1.68%); DTF GAP 4443.50 (+1.69%) are within +1σ (W) 4450 (+2.06%).Bears will seek to break LL 4350 and ideally close the 4305.75 Departure Gap (-1.27%). Downside: 200d MA 4230 (-3%); Q123 HH BoS (breakout) 4208.50 (-3.50%) are beyond -1σ (W) 4275.00 (-1.97%).
Last Week (4361.00 DEC23 -3.70%)Bulls will seek to defend the 4414.25 → 4476.25 Demand Zone, and ideally recapture WVAH 4540 on a closing basis. Upside: WHI 4566 (+1.51%); 4600 isabove+1σ (W) 4572 (+1.65%).Bears will seek to quickly break WTF 1TFU and ideally recapture WLO.1 4438.25 on a closing basis. Downside: U23 Roll SETL 4461.75 (-0.81%); LL 4414.25 is beyond -1σ (W) 4426.50 (-1.59%).
Indicators
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